Stevia potential bigger than we thought, PureCircle

PureCircle is reviewing its operational strategy and development plans, as high purity Reb-A, derived from stevia, is attracting attention as a potential complement to sugar as well as a replacement for existing high intensity sweeteners (HIS).

PureCircle made its initial public offering (IPO) on the London stock exchange in December 2007, in an effort to raise US$50m to fund expansion. At this time, it saw the primary target to be the realm of existing high intensity sweeteners – a market valued at some US$1.3bn annually.

Since then, however, it has become apparent that the market could actually be “much bigger” than envisaged, according to company chairman Paul Selway-Swift, as it could be used in mainstream foods as a part-replacer of sugar content, not just in products currently using high intensity sweeteners.

The consumer interest in Reb-A as a mainstream food ingredient is said to have stemmed from the launch of PureVia launch, the consumer brand launched by PepsiCo and Whole Earth in July.

PureCircle has the exclusive rights to market the PureVia brand across food and beverage segments that do not represent a conflict of interest with PepsiCo and Whole Earth. Existing customers of PureCircle, as well as prospective multinationals, are understood to have made enquires to use the ingredient as a sugar complement.

The reasoning behind such use is that consumers are demanding healthier and more natural foods, as they grapple with obesity and other health issues stemming from high sugar usage. Reb-A is zero-calorie, so its inclusion could reduce the overall caloric load.

Strategy review

This means that PureCircle is now having to review its strategy and development plans, including its stevia leaf supply, extraction and refining capacity.

Expansion of PureCircle’s current extraction plan is presently underway. When this is complete, the company claims it will have the world’s largest capacity for crude stevia extraction, of some 30,000 metric tones per year.

Other investments have been approved, and plantation projects are underway in Kenya, Paraguay, Thailand and Laos.

The level of additional capacity that would be necessitated by the use of stevia as a sugar complement has not been disclosed at this stage.

The firm looks to be in a good position to make some more capacity investments without necessarily needing to seek more funds externally. It has reported a strong cash position of US$44m.

First financial results

PureCircle released its first set of financial results this month, for the full year ended June 30. (Since its floatation took place only in December 2007, the annual figures are on a pro forma basis, for illustration only).

Certainly it was a year of major development for the company: Revenue leapt from US$11m in the 12 months to June 30 2007, to $33.4m in the year to June 30 2008. Operating profit was up from $1.4m to $5.2m.

PureCircle is arguably in the best position to benefit from the huge interest in stevia as a supplier, since in addition to its deal with PepsiCo/Whole Earth it also has a contract to supply supply Cargill, which teamed up with Coca-Cola to develop their own stevia-derived product called Truvia in response to strong consumer demand for low-calorie products.

Regulations

The financial year will go on record as one in which regulatory approval for high purity Reb-A started to open up.

Approval for the sweetener has been granted in Australia, New Zealand and Australia, and the Joint FAO/WHO Expert Committee on Food Additives (JECFA) granted its approval in June 2008.

In the EU and US markets, the regulatory cogs are still turning with respect to Reb-A for food and beverage use. FDA-granted generally recognized as safe (GRAS) was sought in May 2008; so far stevia has only been permitted for use in that market as a dietary supplement.

In Europe, a submission was made to the European Food Safety Authority (EFSA) in September 2007.

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PureCircle is reviewing its operational strategy and development plans, as high purity Reb-A, derived from stevia, is attracting attention as a potential complement to sugar as well as a replacement for existing high intensity sweeteners (HIS).